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Chapter 5 Solutions for Class 12 Microeconomics by Sandeep Garg

Chapter 5 Solutions for Class 12 Microeconomics by Sandeep Garg

Q: 1. How do the Sandeep Garg solutions for Chapter 5 define a production function and its main types?

According to the solutions for Chapter 5, a production function shows the technical relationship between the physical inputs used and the maximum physical output that can be produced. It is expressed as: Qx = f (L, K), where Qx is the output of commodity X, L is labour, and K is capital. The solutions classify it into two main types based on the time period:Short-Run Production Function: A function where output can be increased by changing only the variable factors, while at least one factor (like machinery or land) remains fixed. This is associated with the 'Returns to a Factor'.Long-Run Production Function: A function where output can be increased by changing all factors of production, as all factors are variable in the long run. This is associated with 'Returns to Scale'.

Q: 6. How can you identify the different phases of Returns to a Factor by analysing a production schedule?

To identify the phases from a numerical table, you must first calculate the Marginal Product (MP) for each unit of the variable factor. Then, analyse the MP column:Phase 1 (Increasing Returns): Find the rows where the value of MP is continuously increasing.Phase 2 (Diminishing Returns): Identify the rows where the MP starts to fall but remains positive (greater than zero).Phase 3 (Negative Returns): Locate the row where the MP becomes zero and subsequently turns negative. This marks the beginning of the final phase.

Q: 7. What is the core difference between 'Returns to a Factor' and 'Returns to Scale' as explained in Chapter 5?

The key difference lies in the time period and how factors of production are changed:Returns to a Factor operates in the short-run. It studies the change in output when only one factor is varied, keeping all other factors fixed. The ratio between factors changes.Returns to Scale operates in the long-run. It studies the change in output when all factors are varied simultaneously and in the same proportion. The scale of production changes, but the ratio between factors remains constant.

Class 12 Microeconomics Sandeep Garg Solutions Chapter 5 – Production Function

Sandeep Garg Economics Class 12 Solutions for Chapter 5 is available in PDF format on Vedantu.com and students can download the PDF for free. Sandeep Garg Class 12 Microeconomics Solutions for Chapter 5 provide an easy and understandable explanation of the chapter. The subject experts at Vedantu have prepared these solutions keeping in mind the problems commonly faced by students while answering the questions from this chapter. The Sandeep Garg Solutions Class 12 Microeconomics Chapter 5 will help students to develop a conceptual understanding.

By referring to these solutions, students will get an insight into the topics covered in the chapter and will be able to solve the questions independently. The Sandeep Garg Economics Class 12 Chapter 5 Solutions will help students get a thorough understanding of the fundamentals of the chapter and revise it easily during their exams.

Reasons Behind Increasing Returns to the Variable Factor in Short-run Production

1. Efficient Utilization of The Fixed Factors: At the first stage, when more variable factors are employed to increase the output, then the fixed factors (say, some machines) can be utilized more efficiently. The productive capacity of the fixed factors can be utilized in a better way. For example, a machine can produce 200-meters of cotton cloth per day. If one worker can operate that machine and works for 8 hours per day, the productive capacity of that machine cannot be fully utilized by employing only one worker. If another worker is employed, the machine can run for another 8 hours. As a result, the output can be increased at a steady rate.

2. Technical Division of Labor: If labor is regarded as the only variable factor, then the increased amount of labor can also lead to a technical division of labor at the initial stage. It increases the marginal product of labor. For example, a power loom factory may have 8 power looms and it requires at least four weavers per shift (8 hours per shift) for the proper operation of these looms. This factory also requires another two workers to operate the yarn-reeling machine. Thus, with the increase in labor employment at the initial stage in this factory, some of them will operate the reeling machines, while some others will operate the power looms. This leads to technical division of labor. This process helps in carrying out the whole production process in a smooth way and leads to increasing return to variable factors.

3. Better Coordination between The Factors of Production: At the initial stage, the fixed factor remains under-utilized. So, additional employment of the variable factor (i.e., Labor) leads to better coordination between the fixed and variable factors. Thus, the variable factors can be systematically engaged to operate the fixed factor. This also raises the marginal product of the variable factor,

Reasons Behind the Operation of Diminishing Returns to a Variable Factor in Short Run Production:

1. Employing Variable Factor Beyond The Optimum Proportion: The efficient utilization of the fixed factors becomes possible only when we reach the optimum factor proportions (i.e., an optimum combination of man and machine in our case) If two automatic power looms can be operated by a single weaver, then the optimum proportions in which capital (K) (Or machine) and labor (L) has to be employed, will be 2:1. If more weavers are employed then there will be confusion in the whole system. Extra workers may just remain idle since they may not have adequate fixed factors to work. In such cases, there will be a diminishing return to the variable factor.

2. Imperfect Substitution Possibilities between Factors: Different factors of production (say, man and machine) are not perfect substitutes. So, when more and more laborers are employed keeping the plant and types of machinery unchanged, then increased numbers of workers are not supposed to perform the same work as would have been possible with an extra amount of capital. As a result, there would be a diminishing return to the variable factor. (i.e., Labor).

To study and understand this section completely you must rely on examples. Making notes while studying is a good practice which will further help you remember concepts. You can download free study material from Vedantu in PDF form which can be printed and used to make notes! Do make use of this free but excellent source to make your preparation bulletproof for the upcoming exams.

FAQs on Chapter 5 Solutions for Class 12 Microeconomics by Sandeep Garg

1. How do the Sandeep Garg solutions for Chapter 5 define a production function and its main types?

According to the solutions for Chapter 5, a production function shows the technical relationship between the physical inputs used and the maximum physical output that can be produced. It is expressed as: Qx = f (L, K), where Qx is the output of commodity X, L is labour, and K is capital. The solutions classify it into two main types based on the time period:

Short-Run Production Function: A function where output can be increased by changing only the variable factors, while at least one factor (like machinery or land) remains fixed. This is associated with the 'Returns to a Factor'.
Long-Run Production Function: A function where output can be increased by changing all factors of production, as all factors are variable in the long run. This is associated with 'Returns to Scale'.

2. What is the step-by-step method to calculate Average Product (AP) and Marginal Product (MP) from a Total Product (TP) schedule?

To solve numerical problems as per the CBSE 2025-26 pattern, follow these steps:

Total Product (TP): This is the total output produced by a given number of variable inputs and is usually provided in the schedule.
Average Product (AP): To calculate AP, divide the Total Product (TP) by the corresponding units of the variable factor (L). The formula is AP = TP / L.
Marginal Product (MP): To calculate MP, find the change in Total Product (TP) resulting from employing one additional unit of the variable factor. The formula is MP = ΔTP / ΔL or MPn = TPn - TPn-1.

For example, if TP increases from 10 to 25 when the second unit of labour is added, the MP of the second unit is 25 - 10 = 15.

3. In the context of the Law of Variable Proportions, what is the economic reasoning behind the three stages of production?

The economic reasoning for each of the three stages in the Law of Variable Proportions is crucial for explaining your answers in exams:

Stage 1 (Increasing Returns to a Factor): Initially, as more variable factors are added, the fixed factors are utilised more efficiently. This leads to better coordination and division of labour, causing the Marginal Product (MP) to increase.
Stage 2 (Diminishing Returns to a Factor): Beyond an optimal point, the fixed factor becomes a constraint. Adding more variable factors leads to overcrowding and less-than-perfect coordination. While Total Product (TP) still increases, it does so at a diminishing rate because MP starts to fall.
Stage 3 (Negative Returns to a Factor): If more variable factors are added beyond Stage 2, there is excessive pressure on the fixed factor, leading to poor coordination and inefficiency. The MP becomes negative, causing the TP to decline.

4. Why will a rational producer always choose to operate in Stage 2 of the Law of Variable Proportions and not in Stage 1 or 3?

A rational producer aims for profit maximisation and efficiency, which is why they operate only in Stage 2. Here's the reasoning:

A producer will not stop in Stage 1 because the marginal product of the variable factor is still increasing. This means that every additional unit of input adds more to the total output than the previous unit, so it is profitable to keep expanding production.
A producer will never operate in Stage 3 because the marginal product is negative. This is a stage of technical inefficiency where adding more variable inputs actually causes the total output to fall, which is completely irrational.
Therefore, Stage 2 is the only rational stage of production. In this stage, although marginal product is diminishing, it is still positive, and total product is increasing, eventually reaching its maximum. The producer will operate somewhere in this stage to maximise output and profits.

5. How are the curves for Total Product (TP), Average Product (AP), and Marginal Product (MP) related geometrically?

Understanding the geometric relationship between TP, AP, and MP curves is key to correctly drawing diagrams in exams:

When MP increases, TP increases at an increasing rate.
When MP decreases but remains positive, TP increases at a diminishing rate.
When MP is zero, TP reaches its maximum point.
When MP becomes negative, TP starts to fall.
When MP > AP, the AP curve rises.
When MP < AP, the AP curve falls.
The MP curve intersects the AP curve at its maximum point.

6. How can you identify the different phases of Returns to a Factor by analysing a production schedule?

To identify the phases from a numerical table, you must first calculate the Marginal Product (MP) for each unit of the variable factor. Then, analyse the MP column:

Phase 1 (Increasing Returns): Find the rows where the value of MP is continuously increasing.
Phase 2 (Diminishing Returns): Identify the rows where the MP starts to fall but remains positive (greater than zero).
Phase 3 (Negative Returns): Locate the row where the MP becomes zero and subsequently turns negative. This marks the beginning of the final phase.

7. What is the core difference between 'Returns to a Factor' and 'Returns to Scale' as explained in Chapter 5?

The key difference lies in the time period and how factors of production are changed:

Returns to a Factor operates in the short-run. It studies the change in output when only one factor is varied, keeping all other factors fixed. The ratio between factors changes.
Returns to Scale operates in the long-run. It studies the change in output when all factors are varied simultaneously and in the same proportion. The scale of production changes, but the ratio between factors remains constant.